Increase to SARS Official rate of interest rate and Staff Loans in excess of R3,000
A casual loan exceeding a total of R3,000 (at any given time) to your employee has Employee’s Tax implications for that employee – i.e fringe benefit on low or no interest withheld on the loan.
SARS states that you should charge a minimum interest rate equal to the Official rate of interest (as specified by SARS) on any loan exceeding R3,000. Should you and your employee agree that a specific interest rate be charged on the loan – which is below the SARS Official rate of interest, a fringe benefit arises on which the employee is taxed.
For example R5,000 loan at 5% interest per agreement with employer. SARS Official interest rate is 13% – The difference between 13% rate and 5% rate is subject to fringe benefit tax on a monthly basis until the loan is repaid in full.
The Minister of Finance changes the official rate of interest from time to time – with effect from 1 September 2008 it is 13% per annum.
Should you require any further information, please do not hesitate to contact us.
All material subject to our Legal Disclaimers.